from the you-have-to-be-kidding-me dept

We've argued for years, that there are different kinds of middlemen involved in making markets. Some are efficient, leading to better reach, easier access, and more convenient transactions, while some are inefficient, blocking access, keeping prices inflated, and generally limiting a market. We tend to separate these into two camps: gatekeepers, who limit efficiency, and enablers, who increase efficiency. In truth, there's a pretty big spectrum between those two endpoints, and a single company can shift back and forth along the spectrum between being a gatekeeper some of the time and an enabler at other times. Historically, it's generally (though not always) been true that disruptive innovators are enablers, breaking down the walls set up by the gatekeepers, making markets more efficient, and generally distributing power away from a central gatekeeper out to the end points (the actual participants in the market, rather than the middleman). However, I had thought that it was at least generally recognized and accepted that gatekeepers tend to be bad for markets, and enablers tend to be good.

Obviously, you'd expect some who work for gatekeepers to disagree, though they tend to disagree by arguing that they're not really gatekeepers. However, perhaps I overestimated some of those who support gatekeepers. I was somewhat shocked to hear, recently, that when Public Knowledge's Gigi Sohn spoke at the World Creator's Summit, she was hissed at and booed for suggesting that gatekeepers are a problem. Apparently, the attendees of the World Creators Summit like gatekeepers who hold back actual creators, set up barriers to reaching a market, and only provide a winning lottery ticket to a very small number of creators. Weird.

I'd thought that perhaps that was a one-off situation. However, the "director of legal policy" for the Copyright Alliance -- a front group for the music labels and movie studios -- Terry Hart, has now written a blog post that could be entitled a defense of gatekeepers controlling artists' works. The article is really a summary of a new paper by a law professor, Guy Pessach, who argues that disintermediation is bad in the copyright realm. I will note that this is not a research paper or a study. It's an "essay." And the central theme is to take the rather contrarian position that "disintermdiation" (i.e., doing away with gatekeepers) in the copyright market will "undermine cultural diversity, decentralization and authors' welfare." This, despite all evidence to the contrary -- so it's worth a read.

Frankly, the paper is a mess. It more or less misinterprets the whole "disintermediation" argument, saying it's about getting rid of middlemen entirely, rather than moving from gatekeepers to enablers. The paper instead turns into an ill-informed and confused attack on internet companies as the problem. It actually seeks to argue that artists have less power and control when using internet services than they do in signing deals with major labels/studios. Bizarrely, and incorrectly, it tries to argue that internet intermediaries are locked in and static, while suggesting that traditional intermediaries (record labels, publishers, movie studios, etc.) are not.

Additionally, it is both anticipated and apparent that markets for
Internet intermediaries are highly concentrated, with very few entities
dominating. Since much of the cost of producing an Internet intermediary
(design, technological innovation) is unrelated to the number of users of the
service, the average cost of providing service to each additional user may fall
as the number of users increases. Economies of scale reduce the level of
competition. Cost of entry is rapidly rising while strong network effects give
advantages to large-scale intermediaries

But, of course, that's false. Anyone who's paid even the slightest attention to the dynamic in both markets knows that's false. The major labels have dominated the recorded music business for many decades. Ditto the major studios. In the internet world, it's constantly changing. A decade ago, Yahoo was on top. Apple was just starting to return to being interesting. Facebook didn't exist. YouTube didn't exist. Even MySpace didn't exist a decade ago. Kickstarter didn't exist. Twitter, Tumblr, Hulu, IndieGogo, SoundCloud, SongKick, Bandcamp, TopSpin, TuneCore, Pandora, Spotify -- none of them existed. And that list could be much, much bigger. To argue that the internet world is stagnant and unchanging as compared to the recorded music or movie worlds is dumbfounding.

Then there's this bit of insanity:

I begin by referring to authors and creators while presuming that it is
authors and creators, rather than traditional corporate media, who are in control
of their copyrights. Even so, the bargaining position of originating authors and
creators, versus a handful of Internet intermediaries, may be weaker than it was
for traditional distributors and corporate media.

Really, now? With traditional intermediaries -- i.e., gatekeepers -- if you weren't able to sign a deal, you basically didn't have a career as in music or movies. And so those traditional intermediaries signed ridiculous contracts, in which you gave up your copyrights and nearly all of the royalties. The new enabling companies don't act as a gate. They let anyone make use of them, and they tend to give you full control and ownership of the effort -- you retain your copyright, and you tend to get a much larger percentage of the money earned.

Amusingly, the paper also seems to argue that the wide open internet is somehow less egalitarian than when you had an A&R guy at a major label deciding who the next big music act would be. Really?

It is now apparent and documented that
due to network effects and power law distribution, 40 the typology of the
Internet is such that there is a “a complete absence of democracy, fairness, and
egalitarian values on the web . . . . [T]he topology of the web prevents us from
seeing anything but a mere handful of the billion documents out there.”

Whereas, the old record label system basically cut that off much earlier. It wasn't egalitarian at all. It would sign a very small number of artists, and tell the rest to go do something else with their lives, and then it would select a very few acts each year, put all of its marketing muscle behind a payola scheme to convince the public "this is what you like this year."

Pessach also doesn't seem to understand the nature of promotion, and the concept of multiple revenue streams. Take, for example, his "case study" around YouTube, which he trots out to "prove" that artists suffer under the success of YouTube:

YouTube operates a content partnership program that enables creators
who upload content to YouTube to earn revenues from advertisements that
appear along with their video clips. This is YouTube’s main and only option
that enables creators to get remuneration for making their content available to
the public.

Actually, no, that's not the only option for monetization. First, YouTube allows links directly to buy the songs in question, on at least iTunes, Amazon and Google Play. YouTube also pays ASCAP/BMI and others a license for streaming, and so artists make money that way, contrary to Pessach's later claims that YouTube never pays for direct usage. To leave all that out suggests Pessach simply is unfamiliar with the site he's critiquing and basically removes all credibility from the argument. Second, it leaves out entirely the nature of indirect benefits to widespread attention on YouTube, which leads to sales, concert tickets, opportunities for licensing and much, much more. And, even if we assume that Pessach is accurate in claiming that the only option is to monetize through ads, the deal still tends to be better than most record label deals, where they take 85 to 90% of any royalties. He suggests it's unfair that artists get a "take it or leave it" deal from YouTube on the revenue sharing, but apparently he's never spoken to an artist who gets a record label contract. It tends to be the same thing, unless they're already a huge star.

If we recognize that YouTube is really the equivalent to radio, rather than a label, as Pessach seems to be trying to analogize, then the deal is so much better with YouTube. On radio, first of all, most artists never get any airtime. The few that do often have to have massive payola behind them, and then there are no performance rights royalties (in the US) for the musicians, though there are songwriting/publishing fees to ASCAP and such (but, again, that's true on YouTube as well). On radio there's no choice. On radio there are no direct links to buy as there are on YouTube (which Pessach apparently never noticed). On radio there's no ease of sharing with friends, no embedding to promote the artists you like to your friends. Oh, and there's no revenue share at all, a la YouTube's partner program. Pessach's argument, in short, is to compare apples and oranges, and then misrepresent the apples. Yikes.

He later gets to the crux of his argument, which is basically that the "new intermediaries" "don't finance or invest in the production of content." But, again, he's making a false comparison, pointing to YouTube or Facebook or whatnot, as if they're supposed to do advances. But that's silly, because we're talking about totally different types of intermediaries, ones that are more like radio, than a label. And, it's not like radio ever financed or invested in the production of content either. But if we want to talk about financing the creation of new production of content, let's talk about crowdfunding platforms like Kickstarter, IndieGoGo, PledgeMusic and more. Kickstarter is never mentioned in the paper. Not once. Or how about direct to fan models? TopSpin? Not mentioned. Bandcamp? Not in there at all. And yet, all of those services are used by thousands of artists to finance and "invest" in the production of new content by allowing artists to go directly to their fans and get support.

Instead, the paper keeps going back to YouTube as the problem. But, again, if you compare YouTube to terrestrial radio, using the same "metrics" that Pessach keeps going back to, it seems like YouTube wins every single time. Take, for example, the following:

Finally, in addition to authors’ and creators’ economic welfare,
YouTube’s model may also give rise to long-term alienation that creators and
authors may feel against their almost only effective channels to exposure and
audience attention. Ironically, or not, it is the psychological and sociological
motives of creativity (the same ones that underlie the disintermediation
movement) which make creators and authors disadvantaged. Creators’ desire
to be exposed and gain as much audience attention (and love) as possible to
their creative works is a parameter, which further undermines their bargaining
position against a handful of dominant networked intermediaries who control
the bottlenecks to audience attention.

Beyond the fact that this paragraph is entirely speculative, rather than based on even the slightest bit of evidence, radio is a much much much bigger bottleneck for artists reaching their audience, in that most artists can never, ever get on the radio at all. Yet, somehow Pessach wants to believe that YouTube is worse for artists? Tell that to the growing number of artists like Alex Day, Jack Conte, Dan Bull, Macklemore and others who have built success stories around their YouTube videos.

Pessach's other "examples" of bad internet intermediaries are just as laughable. He points to the widely debunked story about Huffington Post being able to sell for $300 million and not giving any of that money to the bloggers who "made the site popular." Except, most of that story is a myth. HuffPo pays for a large editorial and reporting staff, and many of its most popular stories come from paid staff. For unpaid contributors, it's a tradeoff between whether they want the promotion of the platform. If not, they have a myriad of other options, including setting up their own damn blog. Unlike with the record labels where it used to be either "get signed to a label or go home," those who wish to blog could go in all different directions to make money.

His next example is what he says was "Instagram's failed attempt to commercially utilize, for advertisement purposes, photos that were uploaded by its users." That, again, is a total bastardization of reality. There was a lot of hype about this, but Pessach's interpretation of what happened is wrong. The reality was that a bunch of people didn't understand some boilerplate language used on tons of sites, and assumed, incorrectly, that Instagram was going to put your photos in ads. As the company explained, that had never been its intention at all -- but it was some boilerplate language in the terms, which it quickly changed to clarify for users. Again, when Pessach seems to continually misrepresent things, it really detracts from the argument. No wonder the Copyright Alliance is such a huge fan of the paper.

In the end, the paper is basically just an attempt to tar and feather new enablers that have given many new artists new ways to create, to promote, to connect and to monetize their art -- while bizarrely suggesting, absent of any proof -- that the old gatekeepers were somehow better for artists. About the only explanation it presents is "advances." Yes, the labels gave out advances to a very small number of artists... and then basically holds them as indentured servants as they seek to recoup that money, piling on more and more "expenses," and only counting the tiny fraction that is their royalties towards recouping. Or they could make use of the new platforms, retain control over their work, and only have to pay small fees (between 5 and 30% at the top) for the services provided. Furthermore, the suggestion that these new enablers have meant less diversity in content creation is simply laughable on its face, and deserves no further comment.

If the various RIAA and MPAA front groups are going to try to push support for gatekeepers, one would hope that they'd come up with slightly more competent arguments that can at least pass the laugh test.

from the watch-out dept

We've argued, for a long time, that just railing against "middlemen" misses the point. There are always middlemen. But not all middlemen are created equal. The distinction, that we've discussed multiple times, is the difference between enablers and gatekeepers. That is, historically, many middlemen came to power because they were gatekeepers. If you wanted to do something -- be a musician, write a book, sell a new product -- you effectively had to get "approval" and support from a gatekeeper who had access to those markets. Being a gatekeeper gave them enormous power, such that the gatekeepers often became central to the market, rather than the people/companies they were working with and it also allowed them to craft ridiculous deals that were incredibly favorable to themselves, at the expense of those they were working with. That, of course, is why there tends to be so much inherent antipathy towards traditional gatekeepers.

In contrast to that -- and what we found most exciting about many of the new companies that had popped up over the last decade or two -- was the rise of middlemen as "enablers." These were situations where the middlemen weren't gatekeepers, and weren't "required" to do what you wanted to do. Instead, they were companies that helped give people/organizations a lift up on what they were trying to do, while keeping them and their work (rather than the middlemen) central to the market. So, when you see things like eBay or Etsy or Kickstarter, those are more enablers (and, yes, they do have some restrictions on use, but they're more policy based, rather than "can you make us money"-based).

Of course, the truth is that there's a spectrum along which these middlemen lie. It's not two separate buckets, where "enablers" are here and "gatekeepers" are there. Rather, intermediary companies often fall somewhere along that spectrum. It seems somewhat clear that, for the most part, newer firms are becoming successful by being enablers, rather than gatekeepers. But... they don't necessarily remain enablers their whole lives. One thing that is worth paying close attention to, is how companies shift over time, and when they start to shift from being enablers to being gatekeepers.

In fact, it seems like some of the big "clashes" we've been seeing in the tech/web world lately are along those lines. Lots of people have talked about Instagram and Twitter fighting with each other, which is just the latest in a series of "fights" among hot web companies blocking each other. Considering that many of these companies grew up on a web 2.0 ethos of openness and sharing -- and we're now watching them get more locked down, proprietary and limiting -- it seems obvious that some of these companies are moving along the spectrum from enabler to gatekeeper.

Anil Dash recently wrote a great post in which he frets about the fact that we're effectively losing key parts of the open web, which made the web great. You should read the whole post, as I couldn't do it justice summarizing it here. Again, it seems like many of his points are really about some of the more successful "internet" companies moving along that spectrum more towards the gatekeeper side of things, and that clashing with the more open spirit that the enablers built their reputations on. Dash, rightly, points out that this is self-correcting over time. We shouldn't necessarily fear the new gatekeepers, mainly because a gatekeeper business model, while lucrative in the short-term, is unsustainable in the long term. Companies, which move along that chain chasing the easy money, need to learn that they do so at their own peril. Becoming a gatekeeper merely opens up massive opportunity for a new enabler to disrupt you. That's a lesson that too many companies learn way too late.

That said, Dash fears that because a new generation is growing up in a world with more closed systems, that we may lose some generational knowledge of what came before:

This isn't some standard polemic about "those stupid walled-garden networks are bad!" I know that Facebook and Twitter and Pinterest and LinkedIn and the rest are great sites, and they give their users a lot of value. They're amazing achievements, from a pure software perspective. But they're based on a few assumptions that aren't necessarily correct. The primary fallacy that underpins many of their mistakes is that user flexibility and control necessarily lead to a user experience complexity that hurts growth. And the second, more grave fallacy, is the thinking that exerting extreme control over users is the best way to maximize the profitability and sustainability of their networks.

The first step to disabusing them of this notion is for the people creating the next generation of social applications to learn a little bit of history, to know your shit, whether that's about Twitter's business model or Google's social features or anything else. We have to know what's been tried and failed, what good ideas were simply ahead of their time, and what opportunities have been lost in the current generation of dominant social networks.

I both agree and disagree. I'm among those who get a bit frustrated when I see new entrepreneurs trying something that was done before -- and they seem to have no knowledge of it (ditto for reporters who cover the big "new thing" without mentioning that half a dozen companies did exactly the same thing a decade earlier). But, some of that, I'll admit, may just be the onset of old fogeyism. Yes, there's value in knowing the past, and learning from it, but there is also value in the naivete with which some new entrepreneurs jump into the pool -- often not fully understanding the past. Will they repeat some of the mistakes? Sure. Absolutely. But not being burdened with the past can sometimes be a key ingredient in redoing something that failed in the past, and in somehow making that slight unexpected tweak that just makes it work.

So, I agree wholeheartedly that the "new gatekeepers" mean that we've lost some sense of what made the last generation of internet companies great. And I do hope that the next generation that comes along can similarly disrupt the last generation, often by being the enablers that break up their new gatekeeper role. And I think that companies who understand the history of how enablers disrupt gatekeepers should understand why progressing down that spectrum in search of short-term profits can lead to long-term pain. So I think it's wise for those companies to learn from history. But I'm less worried about the new entrepreneurs jumping into the space. They'll likely find their opportunities in being the new enablers, because that's where the disruption occurs.

Watching the cycles of innovation can be a fascinating (and at times frustrating) past time. Companies make the same mistakes over and over again. The ones, which actually don't fall for the usual traps, are few and far between. But, in the long run, the new startups tend to be pretty good at showing the old guard that they chose the wrong path.

from the picking-fights-in-your-own-backyard dept

One of the false impressions our frequent detractors seem to pick up from the stories covered here is that Techdirt hates middlemen. This couldn't be further from the truth. Mike Masnick has often stated that middlemen can be extremely useful. The problem is, most middlemen aren't. Most middlemen in disrupted industries continue to stake a claim to territory that is no longer theirs, insisting that their presence is still needed, or at the very least, that they be paid their tribute regardless of their actual worth. In essence, they attempt become gatekeepers, something no industry truly needs.

A week and a half ago, I had the opportunity to go to the Novelists, Inc. 23rd Annual Conference. And on one of the panels I sat on, all the growing tension and dissatisfaction came to a head...

[O]ne of my co-panelists went after someone on the panel for "denigrating" agents and said he wouldn't stand for it. So I grabbed the mic and offered, as an agent, to denigrate agents for them. I believe very strongly that good agents are incredible partners and can bring authors more success (I'll get back to this). But more importantly at that exact moment, I was just suuuuuuper pissed. It was disgusting to watch another industry professional demean an author simply because they seemed to be chiseling away at his pedestal.

That's a strange way for a group of people to treat potential clients, especially when the creation of legitimate self-publishing platforms have made the run-of-the-mill agent largely superfluous. If the agent cares for nothing more than finding a way to insert himself between the author and his earnings, then naturally he'll feel threatened by the many recent routes to success that completely bypass him.

But there are agents who actually understand that their role, and the role of the publishing industry in general, is no longer what it once was. McCarthy explains:

Here's my take. The role of agents in the marketplace is changing dramatically. At DGLM, we've always prided ourselves on being a full-service agency. In the past few years, we've been aware that what "full-service" means is changing. As authors have more access to self-publishing and more success in doing that, agents need to be able not only to guide their clients through that process, but to be aware of the pitfalls, potential gold mines, and ways to strategize that are best for an individual project but also an author's entire career.

McCarthy notes that simply because a good agent can be beneficial to authors, it doesn't mean that everyone needs an agent, especially not a bad (or simply an average) agent. However, many in his field believe the latter to be the case, even as their confidence level has shifted from "This is how to get us" to the more desperate and demanding, "You need us." Even as he spoke to several others in his same field, his message was greeted with anger and defensiveness. McCarthy's point wasn't that agents are unneeded, but that agents unwilling to accept their new responsibilities and let go of their old habits have nothing to offer today's writers.

Rather than feel threatened and become openly hostile and dismissive towards any writer that utters the phrase "self-publish," McCarthy is actively working to become an essential element of a writer's career.

What we're seeing is a balancing of power. Authors have more control of their careers and can be more demanding. Does that make my job easier? No. Does it make it more exciting? Yes. Because it's one thing to bandy the word "partner" around and make yourself sound friendly, which seems to be happening a lot. It's another thing to actually act like a partner.

Middlemen can be extremely useful, but they can't simply remain in the "middle" for no other reason than that's where they've been historically. No middleman can honestly state categorically "You need us." It simply isn't true anymore. But, if they're willing to recognize their new role in various content industries, they can be the best thing that's happened to their clients.

from the it's-not-that-hard dept

For a while now, we have written about how legacy gatekeepers need to adapt to modern culture and business models if they want to survive. The primary point of contention that keeps many of these companies from adapting is one of control. Many of them don't want to lose what remnants of control they have left in order to become enablers. This mindset is what will be the death of many companies as the world moves on without them.

Some companies are making at least a half-hearted, if not completely misguided, attempt at trying to be hip. However, it seems to have been about as successful as a 60 year-old trying to use modern slang in order to connect with kids. Take for instance this recent comment by Obsidian CEO Feargus Urquhart in which he describes an exchange he had with a publisher about Kickstarter.

We were actually contacted by some publishers over the last few months that wanted to use us to do a Kickstarter.

I said to them ‘So, you want us to do a Kickstarter for, using our name, we then get the Kickstarter money to make the game, you then publish the game, but we then don't get to keep the brand we make and we only get a portion of the profits’ They said, ‘Yes’.

If you can't see the huge glaring flaw in the unnamed publisher's approach, let me elaborate. This publisher wanted to use Kickstarter as the funding source for an as yet unidentified project, while still keeping every other aspect of the traditional publisher/developer relationship intact. This means that the publisher would pay no money upfront, limiting almost all risk for the success of the project, while reaping all the rewards. Seriously.

While it is great that this publisher had become aware of Kickstarter and its potential for success, the fact remains that those in charge do not understand it in the slightest. The draw of Kickstarter and other crowdfunding services is to help creators fund their works and bring them to market. Few potential backers will be willing to support a project in which the creator loses all rights and control of the work after creation. These services are about empowering creators. A deal, such as the one above, in no way empowers the creator.

Hopefully, this is just a simple misstep as the publisher learns to walk the unfamiliar path of a new business model. We can hope that this publisher learns from this mistake and will take the time to better understand the culture behind crowdfunding and can find success by adapting itself to this culture rather than trying to shoehorn crowdfunding into its current business strategy. Because if it isn't willing to adapt, it might as well give up now.

from the hacking-not-allowed dept

We've talked a lot about the difference between gatekeepers and enablers, and how the latter are becoming more important than the former. Both are types of middlemen, of course. And there have been some reasonable discussions about how enablers can become gatekeepers at times. Indeed, this is something to be aware of, and we should worry about it and speak out when we see evidence of it happening. For example, ebook platforms have become great enablers, allowing lots of new written works to be published, promoted, distributed and sold. In 2002, 250,000 books were published. In 2010 the number was over 3 million -- with much of that being thanks to the easy publishing of ebooks, and the platforms that made it possible to publish a book without a gatekeeper.

But... sometimes those enablers turn into gatekeepers. Witness the news, via Slashdot, that Barnes & Noble removed Linux Format magazine from the Nook store because the magazine dared to publish an article entitled Learn to Hack. It is true that they were using "hack" in the (increasingly less common) definition having to do with breaking into other computers and networks, but the framing of it was mostly around understanding these things to keep yourself secure. Still, do we really want platforms like Barnes & Noble acting as gatekeepers concerning what people can and cannot read?

from the five-points-from-gryffindor dept

Last summer, we praised JK Rowling for finally embracing ebooks, and doing so in a way that made it seem like she really got it. That was when she announced Pottermore, her own website and store that would sell the Harry Potter ebooks directly to fans with no DRM. While the main Pottermore website is still in closed beta, several sources are reporting that the store is now open for business, selling both ebooks and audio books. Over at PaidContent, they have a thorough rundown of the details on how it works.

Unfortunately, when you look at those details, the first thing that leaps out at you is the many small limitations, many of which are caused by Rowling's desire to route around the middlemen. As we've said before, middlemen are not bad, as long as they serve as enablers rather than gatekeepers. Direct-to-fan business models are great, but that doesn't mean creators should ignore the tools that are available to them. Every author need not build their own ebook store, nor every band their own Bandcamp—and of course, for most creators this isn't even an option. But the Pottermore store serves as an example of why even creators like Rowling, who have the resources to build their own platforms for everything, shouldn't necessarily shun the enabler-middlemen at every turn.

For one thing, there was the timeframe. The store was originally supposed to launch last October, but was delayed until now, eight months after the announcement. Prior to this, there were no legal electronic copies of Harry Potter available anywhere—even though pirated copies of each book were available almost immediately. Had Rowling embraced existing ebook stores, she could have released electronic copies alongside physical ones, instead of making her fans wait (and often pirate) in the interval.

Then there are the unnecessary additional barriers to access the books. Downloading from Pottermore requires you to create yet another account with yet another website—a growing source of consumer fatigue online. Rowling has struck deals with major ebook stores to funnel people into her website, meaning if you pull up a Harry Potter title somewhere like the Kindle Store, you are asked to click through and set up a separate Pottermore account, then go through additional steps to link it to your Amazon account. Since many readers do all their ebook shopping this way, and since these stores have always focused on (and found success by) reducing the number of forms and clicks needed to buy a book, this is likely to put off a lot of customers. It also means the books won't be available in the iBook store, since Apple, with their trademark stubbornness, did not agree to a special deal alongside Sony, Amazon, Barnes & Noble and Google. So Rowling is giving up the entire market for impulse buys on the most popular mobile devices in the world, and asking her iFans to go through the more tiresome process of downloading local versions and transferring them to their phones and tablets.

And what do the fans get out of all this? Not much, it seems. The main Pottermore website, which promises social features and additional content, still hasn't launched, so readers have no particular reason to want to visit the store—they are simply forced to, after having waited nearly a year for this supposedly innovative and exciting hub for all things Harry Potter. Dedicated users of existing ebook stores face pointless barriers, so rather than opening her market up to people (like me) who have still never read the books but might decide to do so if they crossed the path of their normal ebook-shopping activities, Rowling has limited herself primarily to existing fans who are willing to jump through hoops for an electronic version.

I have no doubt that the Pottermore store will nevertheless sell plenty of ebooks, at least in the beginning, thanks to the massive popularity of Harry Potter and the long-unmet demand for electronic versions. But what, ultimately, was the point of cutting out the middleman here? The only advantage is that Rowling makes a little bit more money from each sale—but not all the money, because despite being a direct-to-fan model, her publisher apparently still gets a cut, and the partner bookstores will be paid affiliate fees. But even if Rowling's portion of the revenues is significantly higher, it's hard to believe that will offset the lost sales from making the books so hard to obtain. Meanwhile, the fans suffer.

We've praised creators (especially Louis CK) for going the direct-to-fan route before, but that doesn't mean that creators should do everything themselves and ignore the tools that are available to them. Even with her immense resources, Rowling has created a platform that offers an inferior experience to that of the middlemen she worked to eliminate. When good middlemen are used properly by smart creators, everybody wins—when they are ignored merely for the sake of independence, without thought given to the actual benefits, everybody loses.

from the enablers,-not-gatekeeprs dept

There's an idea that's been popular for a while that the internet somehow does away with "middlemen." A perfect example of this is NY Times' Damon Darlin acting surprised at a new middleman business delivering food to various companies from various food trucks and chefs:

Hold on, though, wasn’t that a job description that the Internet was destroying? There was even a 25-cent word for it: disintermediation. The Web, we were told, was eliminating the need for the layers of brokers, agents, wholesalers and even retailers that separate the consumer from the producer.

It's time for this argument to go away. We've been arguing for a while that the internet doesn't kill middlemen, it just changes what kind of middlemen you need. It gets rid of gatekeepers, but replaces them with enablers. There's still a tremendous role for middlemen operations that enable buyers and sellers to do more. But there's no role for someone acting as a "gatekeeper" that blocks what buyers and sellers can do. Of course, gatekeepers hate this, because when they were gatekeepers they were the central player (and could charge monopoly rents). But enablers are not central. They're there to help the really important players: the buyers and the sellers. And there just aren't the same monopoly rents. Such is life in modern society. But, let's drop this claim that middlemen are going away, and admit to the reality: it's just the gatekeepers that go away.

from the it's-not-about-the-middlemen dept

We've talked a lot about how the role of middlemen is changing quite a bit these days. In the past, it was about them being gatekeepers. If you wanted to be a successful musician you had to sign a deal with one of a tiny number of big record labels. If you wanted to be a filmmaker you had to get a big studio to help you out. If you wanted to be an author, you had to sign a deal with a big publisher. And, since those middlemen acted as the only paths to success, they were able to dictate absolutely ridiculous terms. Just take, for example, the typical record label contract, which wasn't just a "loan" or an "investment," but them basically buying all of your copyrights and you still have to pay all of the money back from your earnings... but you don't get the copyrights back after you do so. These were amazingly one-sided deals that totally put the middlemen in the power position.

What's fascinating (and wonderful) to see today is how the changing marketplace means that the actual content creators are in control. This doesn't mean the death of middlemen -- not by a long shot. There's still a huge role for middlemen to play -- but it's as enablers, not gatekeepers. In a world with enablers, the content creators are still the ones in control. The middlemen become supporting players. This is why I always find it funny when those who support the old system claim that they're the ones "helping" creative types. But that's clearly not the case. What they're helping are the gatekeeper middlemen, who have done everything possible to pressure content creators into bad deals because they had no other choice. These days, thanks to the wider choices enabled by the internet, content creators are able to restack the pyramid and put themselves in control, with middlemen actually helping, rather than capturing all of the value.

We already wrote about Conan O'Brien's embrace of social media in Fortune's article about Conan 2.0, but there was another part of the article that I wanted to highlight in this post. And that's the fact that the deal O'Brien signed with TBS is quite different than the traditional TV deal, in that it's not TBS's show that O'Brien appears on, but it's O'Brien's show... with TBS as a distribution partner. But O'Brien and his company really have all the control -- including over the digital side of things. Even the video clips from his show don't come from TBS or use a TBS video player. They're all Team Coco.

O'Brien is in control of all the on-air creative and, just as important, all the digital use of his content. He and his production company Conaco own the show.... It's the opposite of O'Brien's setup at NBC, says Ross, a partner in the company. "Conaco owns the show, and TBS is a participant. At Tonight, NBC owned the show, and we were participants." And ownership makes all the difference for O'Brien and his team.

Team Coco, not TBS, chooses which clips to use, edits them, and posts them. Preview clips from each night's taping go up an hour before the show's East Coast broadcast; within an hour after the show's West Coast broadcast more than a half-dozen clips from that night's show are posted on its site and Facebook, and linked to via Twitter; and the full show is viewable online the next day at 11 a.m. Eastern time. Last year at The Tonight Show Bleyaert had tried to get pre-show clips posted, but even that seemingly simple idea was difficult to execute because NBC.com ran the show's site, and putting up such clips wasn't part of its normal workflow process. "After the experience that we had at NBC, we wanted to be in control," says O'Brien's agent, Rosen. "We wanted the freedom to exploit our content."

This reminds me of another story from a few years back about a band that announced a label had signed with them, rather than them signing with a label. It's happening slowly, but the power positions are shifting and the fact that the gatekeeper role is less and less important, and the enabler role is more and more important, also means that the content creators themselves have more power. They no longer need to sign soul-crushing, abusively one-sided deals. Instead, they can sign deals that put them in control, where the middlemen are truly middlemen helping the content creator, rather than owning the content creator.

We're really not there yet, for most content creators however. The old types of deals are still being signed. But I think we're starting to see signs of that changing. It'll take more time, but the good news is that the content creators are getting more leverage, just as the old middlemen are starting to lose their leverage. And the end result should be a lot better in the long run. The middlemen still have their role in the middle, rather than at the top of the pyramid.

from the handling-money dept

We've talked in the past about the idea of musicians doing "house concerts" or in-home shows (all the way back to 2003), highlighting how folks like Jill Sobule successfully offered up the opportunity for fans to pay $5,000 to have her perform at their home. She had a handful of fans take her up on this offer and said they went great. When Amanda Palmer released her latest album a few weeks back, she included a similar offer. $5,000 for an in-home concert during her Australian tour. Very quickly (and, it appeared, mostly via Twitter), one superfan took up a collection to see if they could raise the $5,000 to have Amanda come play at a barbecue at her place. And, it worked. Amanda has now written a really great blog post describing the overall experience, which apparently went amazingly well:

it was a fantastic fucking night. i feel so incredibly lucky to always work on the assumption that my audience will be made up of people that are interesting, people i want to actually talk to.
i borrowed a piano from a girl who came to the gig (and she wound up playing after me, while i signed and chatted to folks), took requests, drank beers, told stories, listened, hugged. kim came along and played some of her songs, and we sang together, and we....felt right at home. i was given some incredible gifts. i feel like collapsing sometimes under all the awesome that comes into my life.
thank you to all you who were there. that was special.

But what's most interesting is that Amanda goes on to discuss how she was worried about doing this -- especially for the first time. Her main concern was that it would be awkward to show up and play for money -- even though she does that all the time when playing concerts. But there's something different -- something more intimate -- about playing in someone's home, and the idea that they paid for you to be there is definitely a different feeling. Amanda narrows it down to a key point: it sometimes feels awkward to deal with money directly. Money is often a taboo subject, where people like to skirt around actual dollars. I see this all the time in business meetings, when discussing various deals. Everyone always like to dance around the key issue -- the money -- for as long as possible, and always seems to hope it's the "other guy" who brings it up or (even better!) some third party steps in and handles the transactional part.

In fact, that's part of the reason why middlemen exist in so many areas. Asking for money is difficult, and asking for and handling the money is a function that many people just feel more comfortable handing off to a third party. Yet, after all of this, when the deal does go through, and you realize that it's a direct connection between two people who are happy about how each came out of the transaction, people begin to realize it shouldn't be awkward at all. Amanda makes this point as well:

there's something really fucking satisfying about the money not going to everybody inbetween...the promotors, the ticketmasters...and not having those inbetween people involved AT YOUR GIG. there's something that kills the vibe about playing in a venue and knowing that everybody who works there doesn't give a shit about you, your music, or your fans.

Of course, this is the crux of what a market economy is supposed to actually be about: transactions where all parties are better off post transaction, and happier for it. That may sound crass and businesslike, but if everyone's better off, isn't that a good thing?

That's not to say that all middlemen should be done away with. Not at all. There are plenty of great and important roles for middlemen in specific scenarios. Middlemen can do all sorts of useful and compelling things to enable content creators to go on and do much more in the world. But, some middlemen are really just there to make it so that the "awkwardness" of money exchanges goes away, and those middlemen might not be that useful in the long run. One of the key things we've seen over the past few years is that people love to support artists they like directly. In fact, they seem more willing to spend if they think or know that the money actually has a half decent chance of ending up in the artist's wallet. As Amanda notes, more people are starting to realize this, and learn to get over the awkwardness of asking for money, and the awkwardness of removing a middleman who isn't really adding value, but simply obscuring the transaction.

Borders are now crossed more easily than ever before in history. It is a great opportunity for artists and creators of all kinds, as art has no limits but those of our minds. Art enriches itself by eliminating artificial barriers between people such as borders between countries.

Just as artists have always travelled, to join sponsors, avoid wars or learn from masters far from home, now digital technology helps them to cross borders and break down barriers. Their work can be available to all. In a sense, the internet is the realisation of the Renaissance dream of Giovanni Pico della Mirandola: all knowledge in one place.

Yet, it does not mean there are no more obstacles to sharing cultural and artistic works on the net. All revolutions reveal, in a new and less favourable light, the privileges of the gatekeepers of the "Ancien Regime". It is no different in the case of the internet revolution, which is unveiling the unsustainable position of certain content gatekeepers and intermediaries. No historically entrenched position guarantees the survival of any cultural intermediary. Like it or not, content gatekeepers risk being sidelined if they do not adapt to the needs of both creators and consumers of cultural goods.

Of course, the real issue is that middlemen who are used to being gatekeepers need to get away from the gatekeeper mindset, and realize that it's time to be enablers instead of gatekeepers -- but that's difficult to do.

There's also the admission that copyright "should not be an end in itself," which it too often appears to be for some in the industry:

Take for instance copyright. For 200 years, it has proved a powerful way to remunerate our artists and to build our creative industries. But copyright is not an end in itself. Copyright exists to ensure that artists will continue to create. Yet we see more and more often that it is not respected. In some sectors, the levels of piracy demand that we ask ourselves what are we doing wrong. We must ensure that copyright serves as a building block, not a stumbling block.

Look at the situation of those trying to digitise cultural works. Europeana, the online portal of libraries, museums and archives in Europe, is one key example. What a digital wonder this is: a single access point for cultural treasures that would otherwise be difficult to access, hidden or even forgotten.

Will this 12 million-strong collection of books, pictures, maps, music pieces and videos stall because copyright gets in the way? I hope not.

Of course, what Kroes is really pitching is the ongoing campaign to harmonize European copyright laws into a single copyright law across the EU, that will also include a single licensing setup. This effort has been under way for a while, and hasn't gone all that well, in part, because the various countries that make up the EU know that there are vast differences in each market, and they're not convinced a single copyright regime actually does make sense. So, while the language Kroes uses sounds good, it's probably more about complaints concerning regional differences, rather than a recognition that overall copyright law is broken.